Advertisement
YOU ARE HERE: LAT HomeCollections

BEVERAGES

Salud: Vintners raise a glass to the weaker dollar

Bargain prices entice drinkers abroad to taste California's harvest.

February 29, 2008|Jerry Hirsch | Times Staff Writer

With the declining value of the U.S. dollar and increasing wine sales overseas, Charles Shaw wine, an American favorite, may seem in some places more like "One-Buck Chuck."
That's because the low value of the dollar is starting to turn California wines into bargains abroad.
2007 was a vintage year for wine exports, which grew by almost 9% to a record $951 million, the Wine Institute, the industry's main trade group, said Thursday. California wineries make 95% of the U.S. wine sold abroad.
Two large Central Valley companies, E. & J. Gallo Winery and Charles Shaw maker Bronco Wine Co., were among the biggest exporters.

Gallo, the nation's largest wine exporter, has bottles on the shelves of supermarkets in China and 91 other countries, and Bronco is a big supplier of bulk wine that is bottled and sold in England, one of the largest foreign markets for California vintages.

Much of it is similar to Bronco's $1.99 Charles Shaw wine, popularized by the Trader Joe's grocery chain and nicknamed Two-Buck Chuck because of its price.

This could be another record year for wine exports.

The volume of U.S. wine sold abroad is growing by an even faster, 12% rate. California wine is now sold in 125 countries.

On Thursday, the euro rose above $1.52 for the first time in its nine-year history.

Further interest-rate cuts in the United States are likely to keep exchange rates favorable for wine exporters. At the same time, the low dollar helps California winemakers fend off foreign competition in the U.S. Jon Fredrikson, a Woodside, Calif., wine industry analyst, believes there are early signs that the low dollar is starting to pay off for California makers of premium wines.

"American wines are a bargain right now, and that's showing up with what's being shipped to Canada, where the value of our wine shipments is up nearly 25%," he said.

But exporters and industry analysts said the rosy numbers masked a more negative truth about the global wine market: There's a huge trade imbalance.

Though the U.S. sold nearly $1 billion of wine abroad last year, it imported $4.7 billion worth, according to Fredrikson. The U.S. is a target for virtually every other wine-producing nation because it is the most lucrative market in the world, he said. Americans drink about $30 billion worth of wine each year.

High-end California vintners are having trouble breaking into many foreign wine markets abroad, where French labels still carry more prestige, he said.

Much of the wine moving between the U.S. and Europe is less expensive bulk wine that companies are purchasing to bottle and market under their own labels.

Fredrikson said the trade had taken on a certain irony with "these big ships of wine passing each other at night."

Vintners, though, are bullish about exports.

"We can compete very well with anywhere in the world," said Joseph Gallo, chief executive of Modesto-based Gallo, the largest winery in the U.S. Constellation Brands Inc. of Fairport, N.Y., which owns the Ravenswood and Robert Mondavi brands, among others, said its sales of California wine grew by double digits through November.

"A lot of growth is happening with better wine at higher price points," said Jose Fernandez, CEO of Constellation Wines North America. "It's just not people looking for an inexpensive California Chardonnay."

Fernandez believes the low dollar has enticed overseas drinkers to sample California wine, and "once that happens, they discover that they like the quality of the wine."

Growing exports are helping American farmers by drinking up any grape surpluses that develop.

"Exports help keep our grape production in line with consumption and mean better prices for growers," said Dennis Atkinson, vice president of agriculture for Tejon Ranch Co., based in Lebec, Calif.

About half of U.S. wine exports are shipped to the European Union, accounting for $474 million, followed by Canada, $234 million; Japan, $63 million; Switzerland, $26 million; and Mexico, $24 million.

It is the Far East where California wineries are seeing the fastest growth.

Sales to South Korea rose 60% to $18 million. Exports to China soared 74% to $16 million.

A forecast by the European trade group Vinexpo has China cracking the list of the 10 largest wine-consuming nations by 2012.

The trade group estimates that the Chinese wine market will grow 70% between 2006 and 2011.

China, however, can defy expectations, and industry forecasts have typically underestimated the growth taking place in the market.

At a Carrefour supermarket in an affluent section of Shanghai recently, California wines made up only a tiny portion of the store's wine selection. Most of the offerings were from France, followed by Australia. Even Chile took up more space on the wine aisle than Golden State vintages.

Some wine experts see China as an intriguing market, but they are not so sure that the stage is set for Chinese connoisseurship.

"It's very difficult to say how big the Chinese market for imported wine will become," said Philip Reedman, an industry consultant based in Australia who holds the certification Master of Wine. He recently looked at the Chinese wine market for his clients.

Reedman believes that tapping the Chinese thirst for wine will be a long and slow project, one that favors a large, family-owned or private winery such as Gallo over smaller winemakers and companies that must answer to public shareholders.

"They can invest with a very long time horizon in mind," he said, "and I'm convinced that this will be essential."

--

jerry.hirsch@latimes.com

Times staff writer Don Lee in Shanghai contributed to this report.

Advertisement
Los Angeles Times Articles
|
|
|